DERIVATIVES

9 Months Ended

Sep. 30, 2021

Derivatives [Abstract]

Derivatives

NOTE 5 – DERIVATIVES 

The Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the

receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s

derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or

expected cash receipts and its known or expected cash payments principally related to the Company’s subordinated debt. 

Cash Flow Hedges of Interest Rate Risk

Interest rate swaps with notional amounts totaling $

30

 million at September 30, 2021 were designed as a cash flow hedge for

subordinated debt. Under the swap arrangement, the Company will pay a fixed interest rate of

2.50

% and receive a variable interest

rate based on three-month LIBOR plus a weighted average margin of

1.83

%.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in

accumulated other comprehensive income (“AOCI”) and subsequently reclassified into interest expense in the same period(s) during

which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives

will be reclassified to interest expense as interest payments are made on the Company’s variable-rate subordinated debt.

The following table reflects the cash flow hedges included in the consolidated statements of financial condition

Notional

Fair 

Balance Sheet

Weighted Average

(Dollars in Thousands)

 Amount

Value

Location

 Maturity (Years)

September 30, 2021

Interest rate swaps related to subordinated debt

$

30,000

$

1,952

Other Assets

8.8

December 31, 2020

Interest rate swaps related to subordinated debt

$

30,000

$

574

Other Assets

9.5

The following table presents the net gains (losses) recorded in AOCI and the consolidated statements of income related to the cash

flow derivative instruments (interest rate swaps related to subordinated debt) for the three and nine month periods ended September

30, 2021 and September 30, 2020.

Amount of Gain

Amount of Gain

(Loss) Recognized

(Loss) Reclassified

(Dollars in Thousands)

in AOCI

Category

from AOCI to Income

Three months ended September 30, 2021

$

128

Interest Expense

$

(41)

Three months ended September 30, 2020

129

Interest Expense

(28)

Nine months ended September 30, 2021

$

1,029

Interest Expense

$

(111)

Nine months ended September 30, 2020

21

Interest Expense

(31)

The Company estimates there will be approximately $

0.2

 million reclassified as an increase to interest expense within the next 12

months.

The Company had a collateral liability of $

2.0

 million and $

0.5

 million at September 30, 2021 and December 31, 2020, respectively.